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The pressure set up by the SEC in the cryptocurrency markets has been intensely felt for years, and we also have had numerous encounters with the SEC in 2023. The US Securities regulator is disciplining the markets through enforcement rather than new laws due to its negative approach towards the crypto industry. So, what happens now?
USTC, LUNC, LUNA News
Last year, the team behind Terra, which devastated cryptocurrencies with a major collapse, asked a judge in New York to decide the legal status of the tokens, even requesting that the decision be made by a jury. What was the SEC’s response? The representatives of the US institution wanted the matter to be decided by the Judge.
In February, the SEC sued Terraform Labs and its founding partner Do Kwon, accusing the infamous crypto scammer of making billions of dollars from unregistered securities offerings through the issuance of various tokens.
Terraform Labs attorney David Kornblau, in a letter sent to Judge Jed Rakoff on Monday, said that a jury should determine whether UST, LUNA, LUNA, and MIR tokens are securities and whether the “SEC has fulfilled its burden of proof.”
Deciding whether something is a security or an investment contract is not as easy as it seems. Normally, laws should clearly outline certain things without the need for stretched interpretations. However, the Howey test is nearly 100 years old, and it’s only natural that putting citrus groves and crypto through the same test would yield different outcomes. The SEC, however, says that the Howey test needs to be applied in a stretched form to crypto and that almost all of crypto is considered a security.
However, the different rulings in various cases show even the Judges give different answers to the same question. For example, while XRP Coin exchange sales are not considered securities, UST can be defined as a security.
The Terra Case
The company cited the 2021 Audet vs. Fraiser case, in which the jury decided that four crypto assets were not securities, as a precedent. However, the SEC says that the jury cannot make this decision and there is no doubt or dispute that the tokens issued under the Terra umbrella are securities.
In the latest developments in this case, rulings in favor of Terra (although a weak possibility) could positively affect the prices of USTC, LUNA, and LUNC tokens. Even though it might not affect their long-term future positively, the announcement that these tokens are not securities will make it easier for traders striving for speculative rises to do their job.
